In: Finance
Buying the current machine is the best option with highest NPV
NPV | $54,069.46 |
NPV of buying new machine =
NPV | $49,974.16 |
Workings
Buy Current machine | |||||
Year |
Saving in rent post tax |
Purchase price |
Maintenance after tax |
Tax shield | Net CF |
0 | 39000 | -150000 | -111000 | ||
1 | 39000 | -15600 | 4714.29 | 28114.29 | |
2 | 39000 | -15600 | 4714.29 | 28114.29 | |
3 | 39000 | -15600 | 4714.29 | 28114.29 | |
4 | 39000 | -15600 | 4714.29 | 28114.29 | |
5 | 39000 | -15600 | 4714.29 | 28114.29 | |
6 | 39000 | -15600 | 4714.29 | 28114.29 | |
7 | 39000 | -15600 | 4714.29 | 28114.29 | |
8 | 39000 | -15600 | 23400.00 | ||
9 | 39000 | -15600 | 23400.00 | ||
10 | -15600 | -15600.00 | |||
NPV | $54,069.46 |
New Machine | ||||||
Year |
Saving in rent post tax |
Purchase price |
Maintenance-packing after tax |
Tax shield | Training cost | Net CF |
0 | 39000 | -250000 | -27300.00 | -211000.00 | ||
1 | 39000 | -3900 | 7857.14 | 42957.14 | ||
2 | 39000 | -3900 | 7857.14 | 42957.14 | ||
3 | 39000 | -3900 | 7857.14 | 42957.14 | ||
4 | 39000 | -3900 | 7857.14 | 42957.14 | ||
5 | 39000 | -3900 | 7857.14 | 42957.14 | ||
6 | 39000 | -3900 | 7857.14 | 42957.14 | ||
7 | 39000 | -3900 | 7857.14 | 42957.14 | ||
8 | 39000 | -3900 | 35100.00 | |||
9 | 39000 | -3900 | 35100.00 | |||
10 | -3900 | -3900.00 | ||||
NPV | $49,974.16 |